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India Solar Duty Fails Domestic Producers as Demand Dwindles

(Bloomberg) -- India’s bid to protect its solar-equipment makers by imposing a safeguard duty on cheap, Chinese imports has failed, according to domestic manufacturers, who are campaigning for tougher measures.

The country last year imposed a 25 percent tariff on solar cells and modules imported from China and Malaysia for two years. That has resulted in developers either stalling projects to circumvent the two-year timeframe or sourcing cheap imports from Southeast Asia, the Indian Solar Manufacturers Association and equipment makers including Waaree Energies Ltd., Jupiter Solar Power Ltd. and Vikram Solar Ltd. said.

“There is a duty, yet it’s not fulfilling its role,” Jupiter Solar Chief Executive Officer Dhruv Sharma, who is also a member of ISMA’s governing council, said. “No new manufacturers came in, new capacity hasn’t come in, people are shutting shop, employment hasn’t been generated.”

More stringent measures are needed including the addition of anti-dumping and countervailing duties to the safeguard tariff, according to ISMA General Secretary and IndoSolar Ltd. CEO Rahul Gupta. The industry body last year withdrew a petition seeking anti-dumping duties on imports of solar cells and modules, saying at the time it would file a fresh one.

“We are working on an option of filing an anti-dumping petition. Documentation is getting ready and data is being collected,” Jupiter Solar’s Sharma said.

India, which overtook Japan as China’s biggest solar panel export market in 2017, has been struggling to spur its nascent domestic manufacturing industry that the government estimates can meet just 15 percent of the country’s annual requirement. The South Asian nation has been seeking to boost domestic manufacturing capabilities, through both manufacturing tenders as well as the safeguard duty.

It imposed the safeguard duty, with effect from July 30, saying overseas supplies have caused or threatened “serious injury” to manufacturers at home. On Tuesday, the South Asian said it will issue a new, smaller tender to encourage local manufacturing of solar energy equipment after scrapping a larger maiden bid that received poor investor response.

Southeast Asia Imports

While imports from China have halved from a year earlier in the April-November period, shipments have risen nearly five-fold from Vietnam and by 26 times from Thailand, latest data from the commerce ministry show. Rising imports from these Southeast Asian countries are posing a new challenge for the local industry, according to Sunil Rathi, a director at panel maker Waaree Energies.

“Because of this, we are not getting the relief we expected from safeguard duty,” he said in a phone interview.

Imports from Southeast Asia are expected to rise further as the manufacturing capacity set up in the region to sidestep the European Union’s trade barriers on Chinese imports will now be directed toward India after the EU lifted the restrictions in September, according to Bloomberg NEF’s Hong Kong-based Yali Jiang. Chinese companies have set up manufacturing capacity of about 12 gigawatts for solar cells and 14 gigawatts modules in Southeast Asia, she said.

Solar project developers in India are also expected to build less capacity to avoid the safeguard tariff that has increased the capital cost of solar projects, translating into lower orders for domestic manufacturers.

“If imports from China have come down, it’s because projects have stalled,” said Gyanesh Chaudhary, chief executive officer of module maker Vikram Solar, adding that recent price cuts by Chinese manufacturers have nullified the impact of the safeguard tariff.